As
Comcast looks to reunite its flagship TV network with the
NBA after a long separation,
Warner Bros. Discoveryfinds itself mired in an
existential crisis.
The cable giant has gone all-in on a deal to bring the NBA back to NBC, offering as much as $2.5 billion per year for what amounts to the league’s secondary TV package. (Per
Disney’s own offer to re-up with the “A” package, ABC would retain the rights to broadcast the NBA Finals.) This leaves WBD in a bind.
Should WBD fall short of a renewal, the company’s already-vulnerable
cable networks unit will face even greater challenges on the carriage front. TNT, which carries 65 regular-season NBA games and shares the Conference Championship series with Disney, boasts one of the highest affiliate fees on the cable dial. At an estimated $3 per subscriber per month, TNT this year is on pace to rake in $2.56 billion in what amounts to passive revenue.
Trouble is, affiliate deals are structured around the value of the programming on any given cable network—and other than the NFL, nothing’s more valuable than live NBA games. If Comcast succeeds in elbowing its way past WBD with a “Roundball Rock”-augmented offer, operators are likely to balk at coughing up their contracted fees in a post-
NBA on TNTworld. The loss of the NBA playoffs alone could lead to what amounts to the forfeiture of hundreds of millions of dollars in affiliate revenue.
WBD, which has the right to match or otherwise one-up Comcast’s bid, is putting together a counteroffer. A decision about the future of the “B” package may be announced by the time the NBA Finals tip off in June, if not sooner.
As much as certain items on WBD’s balance sheet would seem to argue against paying a 120% premium over the company’s legacy fee ($1.2 billion per year)—there’s still $43.7 billion in debt to be paid down, and the share price has fallen 45% in the last year—the sheer tonnage of free cash flow being generated ($6.16 billion in 2023) suggests that David Zaslav and his lieutenants have the means to make a renewal work.
As the NBA continues to map out its long-term distribution future, the league’s emphasis on maintaining its broad reach may work in Comcast’s favor. Without a broadcast network to its name, WBD’s TV signals don’t penetrate as many homes as Comcast’s, although the divide isn’t nearly as vast as many would believe. Broadcast’s reach is widely misinterpreted; with an average penetration of 67% of all U.S. TV homes, the Big Four nets reach some 83.3 million households in their affiliate markets. As such, NBC’s advantage over TNT, while not modest, is a little over 12.7 million homes.
All of these considerations may prove moot if the craze for M&A in the media space heats up again after the November elections. For some time now, there’s been chatter about Comcast looking to absorb WBD, and while the former’s CEO, Brian Roberts, has tried to pour cold water on any speculation, such a megamerger could see TNT Sports continue its decades-long partnership with the NBA even if the parent company fumbles the bag in the near term.
From the NBA’s perspective, these negotiations already look to be a vindication of Adam Silver’s bullishness about the brand and its enviable demographics, as no matter how things shake out on the WBD/Comcast front, the league is looking at securing another 3x multiple. Pull focus a bit and the increases are even more impressive; if the early estimates hold up, the NBA’s annual rights haul is about to be worth 10 times as much as it was in 2002, when Disney outmaneuvered Comcast.